Income Tax and Social Charges Collection Merged

Thursday 06 June 2013

A single tax notice for l’impôt sur les revenus and the prélèvements sociaux has been introduced for 2013 onwards.

Although it is not going to reduce your French tax bill, the merger of the collection of income tax and the social charges on certain income will at least now mean the bad news is all received in one envelope.

It is one of the 'exceptions française' that there exists two forms of income tax in France - impôt sur les revenus and the prélèvements sociaux.

The two taxes are levied on most forms of income at varying rates, and the latter actually raises far more in revenues for the public purse than income tax. One reason for this is that social charges are also payable on capital gains.

Responsibility for assessment and collection of the social charges on most revenues is divided between the French tax office and the social security contributions collection agency, called 'URSSAF'. The latter collect the charges on employment and business revenues, whilst the French tax offices pick up certain investment, rental and pension income.

It is the social charges assessed by the tax offices that have now been merged into a single tax notice, a significant change for many expatriates, who will be able to obtain a single, more complete picture of their income tax liability for the year.

In the past, taxpayers received their income tax notice in August/September each year and the social charges notice in October/November. So merger of the tax notices does also mean that the collection date for social charges is brought forward.

However, the change will also be accompanied by a choice in the method of payment of both taxes, including payment by instalments each month. Payment by monthly instalment for both taxes will apply automatically to those who already pay their income tax bill in this manner.

Despite the rationalisation in the system, the banks will continue to remain responsible for deducting at source social charges on interest and certain other forms of investment, and notaires will also remain responsible for collection of the social charges on capital gains on the sale of property. Social charges payable on employment and business income will also continue to remain unaffected by these changes.

The government believe there will be savings of around €10 million a year by merging the collection process.